Published: November 15, 1987

(Page 2 of 2)

His reconciliation with his native land came five years ago, when, through his involvement with a Peking opera company in San Francisco, he came to know the Consul General of China in San Francisco. His visit to Tianjin followed, but he could not find the home in which he had grown up.

Mr. Chao said that his former affiliation with the Nationalist Government of General Chiang was well known to the Communist authorities, but no longer mattered. ''Of course they knew,'' he said. ''They just wanted to forget old times.'' Pragmatism had replaced ideology, both for him and for the Government, he said.

Mr. Chao said that dealing with China takes patience, finesse and candor.

''I put every card on the table - no hiding,'' he said. The key, he added, is finding the right party to talk to in China's layers of bureaucracy and organizations. He said the Government was planning to smooth dealings with foreign investors by allowing businesses to deal directly with their overseas contacts, bypassing the political organs. ''You cannot change China,'' he said, ''and you cannot ignore it.'' Mr. Chao has mounted other deals with the Chinese. He and a San Francisco partner, Michael Berolzheimer, recently began to import a white wine from China called Spring Moon, now on sale in numerous Chinese and other Asian restaurants in California and other states. He is also negotiating to manufacture pencils in China, made from cedar supplied by Mr. Berolzheimer's family lumber business, and to import nylon bags, eye visors and other items from China.

He also sees a large potential for the disposable chopstick industry. China, he said, has long had difficulty obtaining a reliable source of wood for chopsticks, often buying from North Korea and Manchuria. Mr. Chao said he could bring in regular low-cost raw materials from Canada.

The goal of all this is not quick profits, but a foothold in China for the future. For example, he said, by opening the laundries he hoped ultimately to be able to manufacture washing machines, carpet-cleaning machines and the like in China for export to all of Asia. Labor is extraordinarily cheap - $35 to $40 a month for a good mechanic - and the machines could compete well in the international market, he feels.

The dry-cleaning operation was a joint venture between Mr. Chao (35 percent), the Chinese (55 percent) and a Hong Kong partner (10 percent). The total investment was $285,000, and Mr. Chao does not expect to be able to retrieve his share anytime soon. Rather he sees it as a down payment on the future. He believes the profits will roll in eventually. After all, he said, offering a distinctly non-Chinese proverb, ''Rome was not built in a day.''

Photo of Fred P. C. Chao at one of his coin-operated laundromats in Berkeley, Calif. (NYT/Terrence McCarthy)